Joe Cherner: ‘Can you please explain to me why the people buying Google at 110 weren’t interested a few days earlier at 85?’
☞ The Google IPO was done so quietly, with so little fanfare, they just didn’t know about it?
Prices are up 3% or so in the last year, while wages are up just under 2%. The Associated Press reported yesterday that ‘the number of Americans living in poverty increased by 1.3 million last year, while the ranks of the uninsured swelled by 1.4 million.’ We are now about 7 million jobs shy of the number President Bush predicted in the 2002 Economic Report of the President, submitted months after the 9/11 attack. (He predicted a gain of 6 million new jobs, versus a loss of more than 1 million.)
One sign consumers are stretched is the car loan. You, dear reader, wouldn’t know about this, because you know ‘that new car smell is the most expensive fragrance in the world’ and that it is far wiser to buy a used car – for cash – than to borrow to buy a new one. Or if you do buy a new one, to take the ‘$1,500 cash back’ rather than to finance.
But there are actually people who do borrow to buy cars – well, in truth, most people do – and what was the standard three-year auto loan when I bought my first one . . . a brand new $2,411 Acapulco blue 1968 Mustang hard top with an 8-track player and yellow blinker lights in the hood winking back at me (the toodela-toodela-toodela horn I would install later) . . . I am told has now become a standard SEVEN-year car loan, with, frequently, if I have heard this right, a mere 4% downpayment. (As the car loses 20% or 25% in value the minute you drive it off the lot, the car loan is already significantly under water from day one.)
So I worry about the economy. More and more tax cuts for the richest among us don’t seem to have lifted children out of poverty after all. Just the reverse. President Bush told us that ‘By far the vast majority’ – which is surely more than half – of the benefit from his tax cuts would go to ‘people at the bottom end of the economic ladder.’ This was wildly, factually, patently – knowingly – untrue. Amazingly, the press let him get away with it and almost half the country fell for it.
Paulo: ‘Yellow watermelon is not a new fancy creation, as you imagine; just something new to Americans. I’ve been eating it for nearly 24 years – since I first had it in Taiwan and then elsewhere in a long stay in Asia.’
Brian: ‘In Vietnam, yellow watermelon was traditionally reserved for the emperor.’
☞ But enough of Vietnam for a few minutes. Let’s talk about the Senate. This article will appear in the September issue of the Washington Monthly.
Follow the Money: How John Kerry busted the terrorists’ favorite bank
by David Sirota and Jonathan Baskin
Two decades ago, the Bank of Credit and Commerce International (BCCI) was a highly respected financial titan. In 1987, when its subsidiary helped finance a deal involving Texas oilman George W. Bush, the bank appeared to be a reputable institution, with attractive branch offices, a traveler’s check business, and a solid reputation for financing international trade. It had high-powered allies in Washington and boasted relationships with respected figures around the world.
All that changed in early 1988, when John Kerry, then a young senator from Massachusetts, decided to probe the finances of Latin American drug cartels. Over the next three years, Kerry fought against intense opposition from vested interests at home and abroad, from senior members of his own party; and from the Reagan and Bush administrations, none of whom were eager to see him succeed.
By the end, Kerry had helped dismantle a massive criminal enterprise and exposed the infrastructure of BCCI and its affiliated institutions, a web that law enforcement officials today acknowledge would become a model for international terrorist financing. As Kerry’s investigation revealed in the late 1980s and early 1990s, BCCI was interested in more than just enriching its clients–it had a fundamentally anti-Western mission. Among the stated goals of its Pakistani founder were to “fight the evil influence of the West,” and finance Muslim terrorist organizations. In retrospect, Kerry’s investigation had uncovered an institution at the fulcrum of America’s first great post-Cold War security challenge.
More than a decade later, Kerry is his party’s nominee for president, and terrorist financing is anything but a back-burner issue. The Bush campaign has settled on a new strategy for attacking Kerry: Portray him as a do-nothing senator who’s weak on fighting terrorism. “After 19 years in the Senate, he’s had thousands of votes, but few signature achievements,” President Bush charged recently at a campaign rally in Pittsburgh; spin that’s been echoed by Bush’s surrogates, conservative pundits, and mainstream reporters alike, and by a steady barrage of campaign ads suggesting that the one thing Kerry did do in Congress was prove he knew nothing about terrorism. Ridiculing the senator for not mentioning al Qaeda in his 1997 book on terrorism, one ad asks: “How can John Kerry win a war [on terror] if he doesn’t know the enemy?”
If that line of attack has been effective, it’s partly because Kerry does not have a record like the chamber’s dealmakers such as Sens. Joe Lieberman (D-Conn.) or Orrin Hatch (R-Utah). Though Kerry has been a key backer of bills on housing reform, immigration, and the environment, there are indeed few pieces of landmark legislation that owe their passage to Kerry.
But legislation is only one facet of a senator’s record. As the BCCI investigation shows, Kerry developed a very different record of accomplishment–one often as vital, if not more so, than passage of bills. Kerry’s probe didn’t create any popular new governmental programs, reform the tax code, or eliminate bureaucratic waste and fraud. Instead, he shrewdly used the Senate’s oversight powers to address the threat of terrorism well before it was in vogue, and dismantled a key terrorist weapon. In the process, observers saw a senator with tremendous fortitude, and a willingness to put the public good ahead of his own career. Those qualities might be hard to communicate to voters via one-line sound bites, but they would surely aid Kerry as president in his attempts to battle the threat of terrorism.
From drug lords to lobbyists
Despite having helmed the initial probe which led to the Iran-Contra investigation, Kerry was left off the elite Iran-Contra committee in 1987. As a consolation prize, the Democratic leadership in Congress made Kerry the chairman of the Subcommittee on Terrorism, Narcotics, and International Operations and told him to dig into the Contra-drug connection. Kerry turned to BCCI early in the second year of the probe when his investigators learned that Panamanian strongman Manuel Noriega was laundering drug profits through the bank on behalf of the Medellin cartel.
By March 1988, Kerry’s subcommittee had obtained permission from the Foreign Relations Committee to seek subpoenas for both BCCI and individuals at the bank involved in handling Noriega’s assets, as well as those handling the accounts of others in Panama and Colombia. Very quickly, though, Kerry faced a roadblock. Citing concerns that the senator’s requests would interfere with an ongoing sting operation in Tampa, the Justice Department delayed the subpoenas until the end of the year, at which point the subcommittee’s mandate was running out.
BCCI, meanwhile, had its own connections. Prominent figures with ties to the bank included former president Jimmy Carter’s budget director, Bert Lance, and a bevy of powerful Washington lobbyists with close ties to President George H.W. Bush, a web of influence that may have helped the bank evade previous investigations. In 1985 and 1986, for instance, the Reagan administration launched no investigation even after the CIA had sent reports to the Treasury, Commerce, and State Departments bluntly describing the bank’s role in drug-money laundering and other illegal activities.
In the spring of 1989, Kerry hit another obstacle. Foreign Relations Committee chairman Claiborne Pell (D-R.I.), under pressure from both parties, formally asked Kerry to end his probe. Worried the information he had collected would languish, Kerry quickly dispatched investigator Jack Blum to present the information his committee had found about BCCI’s money-laundering operations to the Justice Department. But according to Blum, the Justice Department failed to follow up.
The young senator from Massachusetts, thus, faced a difficult choice. Kerry could play ball with the establishment and back away from BCCI, or he could stay focused on the public interest and gamble his political reputation by pushing forward.
BCCI and the bluebloods
Kerry opted in 1989 to take the same information that had been coldly received at the Justice Department and bring it to New York District Attorney Robert Morgenthau, who agreed to begin a criminal investigation of BCCI, based on Kerry’s leads. Kerry also continued to keep up the public pressure. In 1990, when the Bush administration gave the bank a minor slap on the wrist for its money laundering practices, Kerry went on national television to slam the decision. “We send drug people to jail for the rest of their life,” he said, “and these guys who are bankers in the corporate world seem to just walk away, and it’s business as usual… When banks engage knowingly in the laundering of money, they should be shut down. It’s that simple, it really is.”
He would soon have a chance to turn his declarations into action. In early 1991, the Justice Department concluded its Tampa probe with a plea deal allowing BCCI officials to stay out of court. At the same time, news reports indicated that Washington elder statesman Clark Clifford might be indicted for defrauding bank regulators and helping BCCI maintain a shell in the United States.
Kerry pounced, demanding (and winning) authorization from the Foreign Relations Committee to open a broad investigation into the bank in May 1991. Almost immediately, the senator faced a new round of pressure to relent. Jacqueline Kennedy Onassis and Democratic doyenne Pamela Harriman personally called Kerry to object, as did his fellow senators. “What are you doing to my friend Clark Clifford?,” staffers recalled them asking, according to The Washington Post. BCCI itself hired an army of lawyers, PR specialists, and lobbyists, including former members of Congress, to thwart the investigation.
But Kerry refused to back off, and his hearings began to expose the ways in which international terrorism was financed. As Kerry’s subcommittee discovered, BCCI catered to many of the most notorious tyrants and thugs of the late 20th century, including Iraqi dictator Saddam Hussein, the heads of the Medellin cocaine cartel, and Abu Nidal, the notorious Palestinian terrorist. According to the CIA, it also did business with those who went on to lead al Qaeda.
And BCCI went beyond merely offering financial assistance to dictators and terrorists: According to Time, the operation itself was an elaborate fraud, replete with a “global intelligence operation and a Mafia-like enforcement squad.”
By July 1991, Kerry’s work paid off. That month, British and U.S. regulators finally responded to the evidence provided by Kerry, Morgenthau, and a concurrent investigation by the Federal Reserve. BCCI was shut down in seven countries, restricted in dozens more, and served indictments for grand larceny, bribery, and money laundering. The actions effectively put it out of business what Morgenthau called, “one of the biggest criminal enterprises in world history.”
Bin Laden’s bankers
Kerry’s record in the BCCI affair, of course, contrasts sharply with Bush’s. The current president’s career as an oilman was always marked by the kind of insider cronyism that Kerry resisted. Even more startling, as a director of Texas-based Harken Energy, Bush himself did business with BCCI-connected institutions almost at the same time Kerry was fighting the bank. As The Wall Street Journal reported in 1991, there was a “mosaic of BCCI connections surrounding [Harken] since George W. Bush came on board.” In 1987, Bush secured a critical $25 million-loan from a bank the Kerry Commission would later reveal to be a BCCI joint venture. Certainly, Bush did not suspect BCCI had such questionable connections at the time. But still, the president’s history suggests his attacks on Kerry’s national-security credentials come from a position of little authority.
As the presidential campaign enters its final stretch, Kerry’s BCCI experience is important for two reasons. First, it reveals Kerry’s foresight in fighting terrorism that is critical for any president in this age of asymmetrical threats. As The Washington Post noted, “years before money laundering became a centerpiece of antiterrorist efforts…Kerry crusaded for controls on global money laundering in the name of national security.”
Make no mistake about it, BCCI would have been a player. A decade after Kerry helped shut the bank down, the CIA discovered Osama bin Laden was among those with accounts at the bank. A French intelligence report obtained by The Washington Post in 2002 identified dozens of companies and individuals who were involved with BCCI and were found to be dealing with bin Laden after the bank collapsed, and that the financial network operated by bin Laden today “is similar to the network put in place in the 1980s by BCCI.” As one senior U.S. investigator said in 2002, “BCCI was the mother and father of terrorist financing operations.”
Second, the BCCI affair showed Kerry to be a politician driven by a sense of mission, rather than expediency–even when it meant ruffling feathers. Perhaps Sen. Hank Brown, the ranking Republican on Kerry’s subcommittee, put it best. “John Kerry was willing to spearhead this difficult investigation,” Brown said. “Because many important members of his own party were involved in this scandal, it was a distasteful subject for other committee and subcommittee chairmen to investigate. They did not. John Kerry did.”
One could do an equally long story on what George W. Bush was doing during those same years. The contrast would not be flattering to the President.
Have a great weekend.
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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